Friday, September 18, 2009

Exclusivity Not a Problem, Time Limits Might Be, Sprint CEO Says

Sprint Chief Executive Dan Hesse says it is fair for the U.S. government to ask whether handset exclusivity deals should have time limits. But he insists that exclusive carrier deals with handset vendors are important for promoting innovation in the industry, according to Reuters.

"The legitimate question is how long the exclusivity periods need to be," Hesse says.It's a fair question."

Salvatore Tirabassi, a partner at M/C Venture Partners, agrees. Exclusivity does not harm consumers, he argues. "A lot of innovative handsets wouldn't exist without strong carrier partnerships," he argues.

There is a lot of risk for manufacturers when new handsets are introduced and the result is that preferential relationships with carrier partners are needed, he says.

Also, larger carriers get devices before smaller carriers for logical reasons. "Vendors want volume," he says. "Why do so many vendors work with Costco rather than a smaller retailer?" he rhetorically asks.

"If you want to argue that a small carrier in a rural market hasn't benefitted because of iPhone exclusivity, because they can't get it, you have to peel the onion," Tirabassi says. "There are alternatives."

Also, for practical reasons, a longer ramp is needed to recover marketing dollars, for either carrier or handset providers, he argues. Exclusivity provides time to recover marketing investments.

"Apple, for example, does not want a half committed partner," Tirabassi says.

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